Delaying supplier payments can improve the bank balance for a reporting date while weakening the operation that produces future revenue. Rajeev Khandelwal’s documented business and financing experience offers context for this tension. Trade credit is a valuable source of working capital when agreed and sustainable. Unplanned payment stretching can instead transfer a borrower’s liquidity problem into its supply chain.
Distinguish negotiation from arrears
An agreed extension of credit terms gives both parties a basis for planning. Paying beyond those terms without agreement creates uncertainty and can change the supplier’s behaviour. The company should report the difference clearly. A rising payable balance may reflect stronger commercial terms, but it may also indicate unpaid obligations that could lead to suspended deliveries, reduced discounts or demands for cash before future shipments.
Identify critical suppliers
Some inputs are readily available from multiple vendors; others depend on a specialist or long qualification process. Delaying a critical supplier can create costs far greater than the temporary cash retained. Management should understand the operational consequence of each major overdue balance. A small component can stop an entire production line, making the supplier’s strategic importance disproportionate to the amount recorded in the purchasing ledger.
Compare the hidden cost
Suppliers may respond to slow payment through higher prices, smaller allocations or less favourable service. Those effects can be difficult to see in a simple working-capital ratio. The financing decision should consider whether a formal facility would cost less than the commercial damage caused by repeated delays. Cheap-looking supplier funding can become expensive when it reduces reliability, purchasing leverage and the ability to meet customer commitments.
Preserve the trading relationship
Credit Connect’s trade and debt advisory offerings relate directly to the financing landscape in Rajeev’s profile. The practical objective is a cash cycle that suppliers and customers can sustain together. Longer terms can be useful when negotiated around a credible operating plan. They are less durable when they depend on counterparties repeatedly absorbing surprises caused by a funding requirement management has not adequately addressed.
